The National Law Forum

Despite dealing in one of the most valuable asset classes in the world, the real estate industry largely relies on outdated real estate interest recording systems requiring paper-based filings with local government offices. The administrative burdens, inaccuracies and security issues raised by such systems are well known. Increasingly, both government actors and private parties have recognized the potential for key attributes of blockchain technology to modernize real property conveyance and improve processes for recording deeds and other related instruments:

• Greater efficiency due to digitization. The deed recording processes currently employed by many U.S. localities impose burdensome administrative costs. Typically, a physical deed must be delivered to a government employee at the local recording office, where it is subsequently scanned onto the county’s centralized database. Data points from the deed are then manually input onto a public index, which is relied upon to determine ownership of each piece of property recorded thereon. Any subsequent transfers of, or claims to, real property must be manually reconciled with this public index. Blockchains, on the other hand, are entirely electronic data structures. As such, their implementation could greatly reduce, if not eliminate, the constant need for scanning documents, printing labels and organizing physical files in local recording offices – enabling local governments to reallocate human resources to areas where they can be employed more productively.
• Accurate record of ownership that updates in real time. The manual indexing process described above is not just costly and time-consuming. It is also prone to human error, where inputting mistakes may cause future difficulties in accurately tracing chain of title. Since blockchains have the potential to consolidate conveyance and recording of real property rights into a transaction, they can greatly increase the likelihood that the public record accurately represents each conveyance, and do so in real time.
• Tamper-proof and disaster-resistant decentralized ledger. Finally, centralized databases, where recorded deeds are currently stored, are vulnerable to malicious attacks by third parties (or government insiders) seeking to steal, erase, forge or alter existing records. By design, blockchains may ensure that any such endeavor to corrupt the information contained “on-chain” is prohibitively costly. Further, localities typically do not have the resources available to implement a robust back-up system for their property records. Therefore, in the case of a natural disaster destroying physical files or a malicious cyberattack wiping a database, the entirety of the record could be permanently lost. A blockchain, meanwhile, may store recorded data on nodes spanning both geographies and populations, alleviating concerns of lost records, while concurrently reinforcing the integrity and security of the data with each additional node.

By facilitating the efficient allocation of government resources and accuracy and security in recordkeeping, blockchain may provide a desirable alternative or supplement to existing systems for tracking real property ownership. Widespread adoption, however, will first require addressing important legal and regulatory questions, including:

• Who will be able to submit data to the deed recording blockchain, and how will the accuracy of information be ensured at the point of entry onto the blockchain? Will transaction verification responsibilities and/or access to the ledger be limited to government officials, akin to current deed recording systems? Or will more open, permissionless systems be employed?
• How will coordination issues among the various parties involved in the process of real estate transactions be addressed?
• To what extent will state real estate recording acts need to be amended to specifically contemplate recordation on a blockchain system as valid for purposes of state law?
• In the event of disputes regarding a blockchain-based property ownership record, what unique limitations, if any, might a court face in exercising its authority? For instance, might it be necessary to provide injunctive relief in the form of a court-ordered hard fork, and if so, would such a measure even be possible to effectuate?
• Will data on blockchains satisfy legal evidentiary burdens (e.g., statute of frauds)?
• If localities opt to record real estate ownership both in the traditional manner and on a blockchain (or in some combination) and there are inconsistencies between the resulting records, which will govern in a court of law?

Ultimately, blockchain has the potential to improve upon problems that hamper deed recording systems in the United States today. However, until further legal clarity is achieved, wholesale adoption of blockchain-based real estate solutions may face resistance, despite their promise.

Nicholas Bette contributed to this article.

What’s Happening?

On June 28, 2018, Governor Jerry Brown signed a new privacy law that will allow California residents to exercise more control over the personal information companies collect on them and impose new penalties for noncompliance. The law is a first of its kind in the United States and is similar in some ways to Europe’s new General Data Protection Regulation (GDPR). The law will go into effect January 1, 2020, allowing companies time to prepare and adjust their business practices.

Known as the California Consumer Privacy Act of 2018 (AB 375), the law is a legislative response to a successful ballot initiative campaigned by the interest group “Californians for Consumer Privacy.” Once approved for the November ballot, lawmakers moved quickly to craft legislation that offers a more measured approach to consumer privacy than the ballot initiative. As drafted however, the law hews relatively close to the ballot initiative, prompting Californians for Consumer Privacy to withdraw their proposal. Lawmakers anticipate this law will be amended in the run-up to 2020 to further harmonize business interests and consumer protections.

What Does the Law Do?

The law gives consumers additional control over their personal information and new rights they may exercise with companies collecting their personal information. For example, the law provides for all of the following:

• Required Disclosures. The law will require new disclosures regarding consumer personal information. For example, a business may be required to disclose the purposes for which it collects or sells personal information, the categories of personal information that it collects, the sources from which that information is collected, and the categories of third parties with which the information is shared.

• Consumer Rights. The law grants consumers new rights similar to the GDPR’s data subject rights. Consumers will be able to request, for example, deletion of personal information from a business upon the business’ receipt of a verified request.

• Limited “Opt-Out” Discrimination. The law will prevent a business from charging a consumer who “opts-out” of disclosing personal information a different price, or providing a different quality of service, unless the difference is reasonably related to value provided by the consumer’s data.

• Enforcement Mechanisms. The law gives new enforcement powers to the Attorney General for noncompliance and a private right of action to individuals in connection with certain unauthorized access and exfiltration, theft, or disclosure of a consumer’s non-encrypted or non-redacted personal information, making it easier for individuals to sue companies after a data breach.

• Penalties. The law provides that any person, business, or service provider that intentionally violates the law may be liable for a civil penalty of up $7,500 per violation. The law will also allow recovery of damages in a private right of action for an amount not to exceed $750 per incident or actual damages, whichever is greater.

• Restricted Sale of Personal Data. The law will curb the sale and resale of personal data by third parties who receive personal data from a business, unless the disclosing business has given consumers explicit notice and the opportunity to “opt-out.”

• Age Restrictions. The law will prevent the sale of personal information of a consumer under the age of 16, unless affirmatively authorized through an “opt-in.” For individuals under the age of 13, parental consent will also be required.

• A Definition of “Personal Information.” The law defines “personal information” with reference to a broad list of characteristics and behaviors, personal and commercial, as well as inferences drawn from this information. The concept is much broader than the traditional United States understanding of personally identifiable information, bringing it closer to the GDPR definition of “personal data.”

What Should I Do?

If your business collects consumer personal information, whether for marketing purposes or in the course of providing your products or services, now is the time to reevaluate your privacy practices. While January 1, 2020 is more than a year away, achieving compliance early can save your business from costly enforcement actions. Privacy laws are rapidly changing across the globe. To be sure your business is in compliance with the law, whether now in effect or coming soon, it is critical to work with experienced counsel to evaluate your risk exposure.

You could almost hear the cheers of plaintiffs’ class action lawyers in California last night, as California’s governor signed the most sweeping privacy law this country has seen to date.  Notably, the law gives consumers the right to statutory damages in the event of a breach if the company holding the consumer’s information failed to implement reasonable security measures.  Those statutory damages are not less than $100 and not more than $750 “per consumer per incident or actual damages, whichever is greater.”

It is clear that the General Data Protection Regulation from Europe inspired many of this law’s other provisions, such as required transparency in how entities collect and share data and the right of individuals to have their personal information deleted.

The new law does not take effect until January 2020, giving organizations time to digest the requirements and providing legislators with the opportunity to refine the hastily drafted language. Corporations and legislators threw the bill together at the last minute to avoid a ballot measure that would have contained even more onerous fines, requirements and protections.

Section 271(f)(2) reads:
“Whoever without authority supplies…in or from the [US] any  component of a patented invention that is especially made…for use in the invention and not a staple article of commerce….where stccg component is uncombined in whole or in part, knowing that such component is so made of adapted and intending that such component will be combined outside of the [US] in a manner that would infringe the patent if such combination occurred within the [US], shall be liable as an infringer.”

Patent owners who prove infringement under s. 271 are entitled to relief under s. 284. Section 284 reads:

“Upon finding for the claimant, the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer….”

In WesternGeco LLC v. Ion Geophysical Corp., No. 16-1011 (June 22, 2018), the Supreme Court decided that patent owner WesternGeco (“WG”) was entitled to profits lost outside of the US due to Ion’s infringement under 271(f)(2). Ion had sent components of WG’s patented “system,” that allowed improved mapping of the ocean floor, abroad where they were assembled into the system by a third party that competed for business with WG–presumably by undercutting WG’s price.

The counterargument, embraced by a dissent by Goresuch and Breyer, was that allowing recovery of lost profits overseas amounted to a de facto impermissible extraterritorial extension of the monopoly created by a US patent. The majority argued that they were simply crafting an appropriate remedy for Ion’s infringing acts, that took place in the US.

The problem that the minority had with this approach is that the recovered damages were based on the profits that WG would have realized if it had no competition abroad, not the profits attained by the companies that could lawfully compete with WG once they assembled WG’s system.

The majority had to deal with the presumption that federal statutes apply only within the territorial jurisdiction of the US.

They concluded that the conduct relevant to the “focus” of s. 271 occurred in the US. Therefore, the case “involves a permissible domestic application” of the statute, even if other conduct occurred abroad.”

In other words, the Court unsurprisingly found that the infringement is the focus of the damages statute and that s. 271(2)(f) focuses on domestic conduct: “Thus, the lost profit damages that were awarded to WG were a domestic application of s. 282.”

Note that 271(2)(f) does not require that any activities occur abroad in order for liability to attach. Of course, if Ion sent the components abroad with knowledge and intent, but the third-party recipients never assembled the components and used the system to compete, Ion would still be guilty of infringement but there could only be token damages. The dissent would limit the damage award whether or not the components were assembled into the patented system.

The unasked question is not whether or not there was infringement, but were the damages “fair”? As the dissents complain, “WG seeks lost profits for uses of its invention beyond our borders. … In measuring its damages, WG assumes it could have charged monopoly rents abroad premised on a US patent that has no force there. Permitting damages of this sort would effectively allow US patent holders to use American courts to extend their monopolies to foreign markets.”

Me thinks that the dissent doth complain too much! Ion is being held liable for infringement due to specific acts it carried out in the US. If WG could charge monopoly prices abroad, it was not just because it could keep Ion from sending disassembled systems abroad. There was either no effective competition – because WG’s system was better than that used by competitors – or WG may own foreign patents rights in the countries where the third parties were assembling the systems, but WG decided that it was more cost-effective to sue in the US.

Of course, WG would be forced to sue abroad if a third party was sourcing the components abroad and assembling them abroad, but that discussion is beyond the scope of this note. I just note, as does the dissent, that a US patent does not protect its owner from competition beyond its borders but, as I have briefly discussed above, this case is not subject to such an easy analysis.

In Carpenter v. United States, the U.S. Supreme Court recently held that the Fourth Amendment requires the government to get a search warrant to obtain Cell-Site Location Information (CSLI) from wireless carriers. CSLI reveals the location of a cell phone based upon the cell towers that the cell phone is using to obtain a signal. Carpenter marks an important and noteworthy change of course in Fourth Amendment jurisprudence.

The Carpenter decision is significant for a number of reasons.  First, the decision drastically alters the landscape of what information the government must obtain a search warrant for. Previously, a search warrant was generally not required in order to obtain transactional data in the possession of third parties. Second, the implications of the decision in Carpenter may be far-reaching. It remains to be seen what other information and records (e.g., metadata, real-time cell-site information, etc.) may fall within the purview of the decision.

The Carpenter decision may also have implications that extend beyond Fourth Amendment law into privacy regulation. While the FTC has long considered certain device-created tracking data to be more private than other types of information (e.g., Vizio), Carpenter may give additional ammunition for privacy advocates by elevating at least some longitudinal tracking data to Fourth Amendment-protected status. However, privacy scholars generally think about Fourth Amendment law as distinct from consumer-protection requirements because the purpose of the former is to protect individuals against nonconsensual government snooping, while the latter primarily serves to limit what companies can do with consumers’ data. Still, if law enforcement must obtain a warrant to access this data, privacy advocates may contend that companies should face increased restrictions on accessing other types of consumer data as well.

Expectation of privacy and third-party doctrine

The defendant, Timothy Carpenter, was convicted at trial of participating in a series of robberies following an investigation where FBI agents obtained 127 days of CSLI from Carpenter’s wireless carrier, via an order obtained pursuant to the Stored Communications Act (18 U.S.C. § 2703). The CSLI in question established that Carpenter’s phone was in the proximate area of several of the robberies in question.

Carpenter filed a motion with the District Court seeking to exclude the CSLI evidence because it was obtained without a search warrant. The District Court denied Carpenter’s motion and the Sixth Circuit Court of Appeals affirmed.

In its 5-4 decision, the Supreme Court overruled the District Court and the Sixth Circuit and held that a search warrant is required in order for the government to obtain CSLI. The opinion, authored by Chief Justice Roberts and joined by Justices Ginsburg, Kagan, Sotomayor, and Breyer, noted that CSLI “does not fit neatly under existing precedents,” and that “requests for cell-site records lie at the intersection of two lines of cases, both of which inform our understanding of the privacy interests at stake.” The first line of cases “addresses a person’s expectation of privacy in his physical location and movements.” The second line of cases stand for the proposition that “a person has no legitimate expectation of privacy in information he voluntarily turns over to third parties.”

The majority stated that CSLI “is detailed, encyclopedic, and effortlessly compiled.” However, “[a]t the same time, the fact that the individual continuously reveals his location to his wireless carrier implicates the third-party principle of Smith and Miller.” Under those cases and others articulating the so-called “third-party doctrine,” the Court had previously held that a person forfeits their expectation of privacy when they disclose information to a third party. As a result, the government typically did not need to obtain a search warrant to access transactional information held by third parties.

In Carpenter, the majority declined to extend the third-party doctrine to CSLI, noting that “[g]iven the unique nature of cell phone location records, the fact that the information is held by a third party does not by itself overcome the user’s claim to Fourth Amendment protection.” Specifically, the majority held that “an individual maintains a legitimate expectation of privacy in the record of his physical movements as captured through CSLI.” The majority reasoned that “[m]apping a cell phone’s location over the course of 127 days provides an all-encompassing record of the holder’s whereabouts. As with GPS information, the time-stamped data provides an intimate window into a person’s life, revealing not only his particular movements, but through them his ‘familial, political, professional, religious, and sexual associations.’” Thus, when the government obtains CSLI, “it achieves near perfect surveillance, as if it had attached an ankle monitor to the phone’s user.”

The majority further reasoned that the third-party doctrine was inapplicable to CSLI because “[t]here is a world of difference between the limited types of personal information addressed in Smith and Miller and the exhaustive chronicle of location information casually collected by wireless carriers today.” As such, given the nature of the information sought, the majority held that a search warrant is required in order to obtain CSLI.

The majority did, however, note that its decision was “a narrow one” which only addressed the issue of historical CSLI. The decision did not call into question the application of the third-party doctrine to other types of business records and recognized that there may be certain case-specific exceptions that would not require a warrant (e.g., exigent circumstances).

Dissenting opinions

Justices Kennedy, Thomas, Alito, and Gorsuch all filed dissenting opinions. Justice Kennedy argued that, because the CSLI was in the possession of wireless carriers, the third-party doctrine should apply and no search warrant is necessary. Justice Alito agreed with Justice Kennedy, and he further argued that the Fourth Amendment has not previously applied to the compulsory production of documents. Justice Thomas argued that the Fourth Amendment should only protect searches of property, as opposed to a violation of a person’s “reasonable expectation of privacy.”

Justice Gorsuch, on the other hand, questioned the relative narrowness of the majority opinion, suggesting that the third-party doctrine needed to be revisited in a systemic manner. Justice Gorsuch reasoned that the specificity and detail of the data collected is irrelevant. Rather, he argued that CSLI data should be considered personal data and not third party data – similar to the case of Ex Parte Jackson (1878) which determined that a letter in the mail was the property of the author, not of the post office that held it, and therefore warranted a search.

This is a broad reading of the property rights and could have made the opinion even more significant had it been the majority. But this argument was not preserved by Carpenter’s legal team, so Justice Gorsuch ultimately dissented from the majority opinion rather than filing a concurrence on his preferred grounds.  Nevertheless, Justice Gorsuch’s opinion is important because it indicates that advocates for broader Fourth Amendment rights may pick up an additional vote if future litigants preserve this argument.

Antonia Ambrose contributed to this blog post.

Linda Faye Jones was an employee of Children’s Hospital and Health System, Inc. Tragically, she developed recurring bladder cancer and at the age of 60, decided to retire. As a 37-year employee, Linda was eligible for a substantial pension under her employer’s defined benefit pension plan.

Linda retired on August 26, 2015 and elected to receive her pension in the form of a ten-year annuity. Payments under her pension were set to commence six days later, on September 1.  Unfortunately, Linda passed away on August 29, just three days into her retirement.

Linda was unmarried but had named her daughter Kishunda as her sole beneficiary for her pension payments. Unfortunately for Kishunda, the plan stated that as follows:

In the case of a Participant who dies prior to the date distributions begin, the Participant’s designated beneficiary will be his or her surviving Spouse, if any, pursuant to the terms of [another plan section].

Had Linda survived another six days until payments began, the plan would have honored her beneficiary designation and Kishunda would have received ten years’ worth of annuity payments.

Kishunda sued but the U.S. District Court for the Eastern District of Wisconsin, Judge Lynn Adelman presiding, held that the plan administrator’s determination that Kishunda was not eligible to receive the disputed pension benefits was not arbitrary and capricious. In part, the court noted that the rationale for the plan provision was to comply with federal tax laws that state that only spouses can collect pension benefits when a spouse dies before distribution. Finding that it was reasonable for the plan to be drafted in a manner that mimicked these laws, the court declined to adopt Kishunda’s strained interpretation of the plan. In the words of the Seventh Circuit, while the provision “has an unfortunate consequence here,” the provision is not unreasonable.

This case is a notable reminder of how ERISA’s “arbitrary and capricious” standard and lack of a right to a jury trial, can result in outcomes that even the court describes as “unfortunate.”  While readers may understandably question why an employer would insist on enforcing plan language that results in such an inequitable situation, it is also important to keep in mind that operating a plan contrary to its written terms threatens the continued tax qualification of the plan under IRS guidelines. It was no doubt a difficult decision to deny benefits to Kishunda, that decision may have been compelled out of a concern for the tax qualification of the plan as a whole.

The case is Jones v. Children’s Hosp. & Health System, Inc. Pension Plan, Appeal No. 17-3524 (June 13, 2018).

The latest statistics show average email open rates for the legal industry are just over 21%. If your email campaigns are performing below this benchmark, you have some work to do to boost those open rates. Here are 5 tips to help you do that:

Tip #1: Resend to subscribers who didn’t open your email the first time.

You probably think that once you send an email to your list, there’s not much you can do to reach the non-openers with your message.   Oh, but there is. You can resend the same email campaign to subscribers who didn’t open them. All you need to do is change your subject line.

Whatever email distribution service you use — Constant Contact, MailChimp, etc. — offers a way to resend to non-openers. Just search for instructions in the Help section. You just need to wait several days — or even up to a month — to resend. While your open rate won’t be as high as the first time you sent your email, you will increase the number of subscribers who see your email and re-engage them so that the next time they receive an email from you, they are more likely to open it the first time.

Tip #2: Clean your list.

If you have people on your list who have not opened any of your emails for the past 18 months, you need to ask them if they still want to hear from you. Removing inactive subscribers does not hurt you, it helps you. Your open rates will increase, your bounce and unopen rates will decrease as will your email marketing costs. Search the help library on your email distribution service’s website for “clean list” and you will see instructions on how to send re-engagement campaigns to your 1- and 2-star subscribers — these are the ones who haven’t engaged much with your emails. Send the re-engagement campaign at least three times before you move them off your list.

Tip #3: Segment your list.

The more relevant your emails are to your recipients, the better your open rate will be. To achieve relevancy, you need to segment your list using criteria that aligns with your subscriber’s areas of interest (car accident/truck accident/motorcycle accident/bicycle accident) or buying patterns (prospect/new client/repeat client/old client (no business within past year). Creating campaigns for each segment that speaks to the uniqueness of each subscriber’s situation will really boost your open rates.

Tip #4: A/B test subject lines.

If you have a large list — more than 5,000 subscribers — you should be A/B testing your campaigns. Test two different subject lines on a small percentage of your list and then roll out the highest performing subject line to your entire list.

Tip #5: Examine open rates to create better subject lines.

Take a look at your top 5 best and worst performing email campaigns to see what they have in common. We’ve found that the best performing subject lines typically have:

• 50 or fewer characters

• Are personal or local (“Brian, these tips could save you a bundle in legal fees”)

• Are concise and clear (“Free eBook offer ends August 1”)

Take what is working and replicate it for future campaigns and jettison what isn’t working.

When is time compensable under California law? In a recent decision by the Ninth Circuit Court of Appeals, Sali v. Corona Regional Medical Center, the court explained that there are two categories of compensable time: (1) the time when an employee is “under the control” of the employer, whether or not the employee is actually engaging in work activities, and (2) the time when an employee “is suffered or permitted to work, whether or not required to do so.”

Background

The case involved registered nurses (RNs) who brought a putative class action against their employer, alleging, among other claims, that the employer’s rounding time policy failed to pay them for all compensable time. The company used an electronic timekeeping system that tracked when employees clocked in and out from work, and rounded the time to the nearest quarter hour. For example, if an RN clocked in at 6:53 a.m. or 7:07 a.m., the time was rounded to 7:00 a.m. This system is also known as “7/8 rounding,” meaning that clock ins made up to seven minutes before or after the hour are rounded to the hour, but clock ins made eight minutes or more before the hour are rounded back to the prior quarter hour and those made eight minutes or more after the hour are rounded up to the next quarter hour.

The district court denied class certification on the rounding time claim, concluding that individualized issues would predominate in determining the employer’s liability. The district court noted that “time records are not a reliable indicator of the time RNs actually spent working because RNs frequently clock in for work and perform non-compensable activities, such as waiting in the break room, getting coffee, or chatting with their co-workers, until the start of their scheduled shift.”

The Ninth Circuit’s Decision

The Ninth Circuit reversed the district court’s decision. First, the Ninth Circuit recognized that a rounding time policy is permissible under California law if it is “fair and neutral on its face and ‘it is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they actually worked.’” The Ninth Circuit also said that the district court abused its discretion by incorrectly interpreting “actually worked” to mean “only time spent engaging in work-related activities.”

The court noted that compensable time in California includes “the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so.” Time is compensable when an employee is working or under the control of his or her employer. For example, time could be compensable if an employee is working but is not subject to the employer’s control, such as when an employee works unauthorized overtime. And time may be compensable if an employee is not working but is under the control of the employer, for example, when the employee is required to remain on the company’s premises or the employee is restricted from engaging in certain personal activities.

For the purposes of class certification, the court said that the question of whether the rounding policy was unfair required a focus on the company’s policies and practices, and whether they “restricted RNs in a manner that amounted to employer control during the period between their clock-in and clock-out times and the rounded shift-start and shift-end times.” Since the Ninth Circuit concluded that the determination of this issue did not depend on individualized factual questions and was capable of class-wide resolution, the district court’s denial of class certification was reversed.

Key Takeaways

What can employers do?

• If a company uses a rounding system, it may want to take caution to ensure that its system is fair and neutral, and that, on average, the amount of employee time that is deducted is the same or less than the amount added to time records as time worked. Further, a company can perform routine audits to ensure a neutral system.
• Consider whether to use a smaller rounding interval to limit risk, like moving from a 7/8 system to a five-minute rounding system.
• If an employer uses a rounding policy, it may want to consider providing employees with a grace period for clocking in late up to the rounding interval.
• Employers may want to review their written policies and ensure that the policies clearly prohibit off-the-clock work and require employees to record all time worked. They can also clarify that employees are prohibited from working outside of their regular shift without management approval.
• The policy can also clearly state that employees are not required to arrive at the workplace before the start of their shifts or to remain on the premises after their shifts end.
• Consider adding more time clocks in the workplace to reduce any pressure on the employees to feel that they must arrive early to clock in.
• Consider providing training for management on both categories of compensable time and explaining that if a manager requires employees to arrive at the workplace before their shifts or remain after their shifts, the employees’ time spent at the workplace before and after the shift may qualify as compensable time.
• Employers can ensure that their meal period policies provide time that is duty free and allow employees to come and go as they please, including leaving the premises.
• Consider providing a complaint procedure for employees to report any complaints about their schedules, meal and rest breaks, records of time worked, and pay.